WASHINGTON (Reuters) - A $30 billion proposal by President Barack Obama to spur lending to small businesses cleared a U.S. House of Representatives panel on Wednesday with no Republican support.
The House Financial Services Committee approved the Small Business Lending Fund Act by a vote of 42-23. House Speaker Nancy Pelosi said in a statement the legislation would be brought up for vote soon in the full House.
Obama said he was pleased that the panel had moved quickly on the measure and urged Congress to continue moving swiftly on more job creation measures.
“Small businesses are the backbone of the American economy, and where most new jobs begin,” Obama said in a statement. “But one of the major challenges facing small business owners is access to the credit that they need to grow and hire.”
The legislation would establish a $30 billion fund to boost lending to small businesses looking to hire and expand their operations by providing additional capital to community banks.
“The committee also adopted several bipartisan amendments to strengthen the bill and defeated numerous amendments by Republicans designed to defeat the measure,” committee chairman Barney Frank said in a statement.
Republicans on the services committee opposed the lending plan, arguing it was the wrong prescription for battered small businesses and would encourage more government involvement in private businesses along the lines of the $700 billion Wall Street bailout known as the Troubled Asset Relief Program (TARP).
Obama originally proposed carving out the $30 billion from TARP. But community banks, which are a major source of small business credit, are reluctant to be associated with the TARP program, fearing it would tarnish their reputations.
House Democrats stressed that the small business lending program is separate from TARP and requires accountability and oversight by Congress, the General Accounting Office, and the Treasury Department’s Inspector General.
The plan calls for the government to inject capital into independent banks. In return the banks would pay the government a dividend, but the dividend rate would decline as their lending to small businesses increased.
A study released on Tuesday by the congressional Joint Economic Committee said that hiring by small business continues to decline even as larger firms have begun to increase staff. It blamed an inability of smaller firms, a major source of job growth in the U.S. economy, to access credit from banks.
Reporting by JoAnne Allen; Editing by Will Dunham, Gary Hill